Learn About Excise Duty in India

The article discusses excise duty, its applicability, how to pay, steps to pay the excise duty online, and exemptions.

Taxes are a fundamental part of our society. In India, special taxes seek to tax the consumption of specific products, increasing government collection. These are divided depending on the item and seek to obtain money and work for certain public policies. This is how we find taxes on alcohol, hydrocarbons, beer, tobacco, electricity, means of transportation, and more. In this article, we will talk about excise duty in India.

Content

• What is Excise Duty?
• Types of Excise Duty
• Who is Required to Declare and Pay Excise Duty?
• Exemptions
• When to Pay?
• How to Pay
• Step-by-step Process
• Penalty

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What is Excise Duty?

Excise duty is a tax levied on the products manufactured within a country. Retailers or intermediaries collect this indirect tax from customers and pay it to the Central Government.

Excise duty is payable when the manufacturers remove goods from their production area or warehouse and transfer it for sale. Here, the actual sale of goods or the amount is not considered since tax is applicable on manufacturing these goods. The Central Board of Excise and Customs (CBEC) administers the whole tax collection process.

It was previously collected as Additional Excise Duty or Central Excise Duty. However, the Government implemented the Goods and Services Tax (GST) in July 2017 and consolidated several types of excise duty. Currently, it applies to specific items, as listed below –

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Alcohol and alcoholic beverages – Beer, wine, fermented drinks, and other derivatives. The tax base varies depending on the volumetric degrees of alcohol of the drink. Higher the grades, the higher the tax.

Electricity – Yes, electricity is another of the products affected by this type of tax. In this case, its objective is environmental. The manufacture of energy is taxed, although there are some exceptions.

Tobacco products – This special tax also taxes the different processes for manufacturing tobacco. The percentage varies depending on the activity.

Hydrocarbons – Gasoline, diesel, fuel, aerosol, oils, or benzols are also subject to this tax. The tax will be higher or lower depending on the product’s characteristics.

Taxes on specific means of transport – Automobiles, ships, and aircraft.

Carbon taxes – Sale and consumption of coal, although the territories and international regulations must be considered to see each case.

Types of Excise Duty

In India, there are three different types of central excise duties – 

Basic – Basic Duty is imposed under Section 3 of the ‘Central Excises and Salt Act’ of 1944 on all types of excisable products other than salt produced in India. It is imposed at the rates mentioned in the Central Excise tariff Act, 1985.

Additional – Under Section 3 of the ‘Additional Duties of Excise Act’ of 1957, the charge and collection of excise duty of the goods is permitted and is charged in place of the sales tax. The central and state governments share this duty.

Special – Section 37 of the Finance Act, 1978, states that the Special Excise Duty will be levied on all excisable goods that come under taxation under the Basic Duty of the Central Excises and Salt Act of 1944. The Finance Act announces yearly if the Special Duty will or will not be charged and collected in the relevant financial year.

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Who is Required to Declare and Pay Excise Duty?

• Authorized depositories (factory or fiscal warehouse).  
• Those obligated to pay the customs debt upon importation.
• Registered recipients and authorized recipients (products from another Member State). Fiscal representatives of distance sellers established in other Member States.

Exemptions

In addition to other specific cases of each of the Special Manufacturing Taxes, in general, the following will be exempt:

• Diplomatic or consular deliveries.
• Deliveries to international organizations and the Armed Forces of any State other than Spain, members of the North Atlantic Treaty.
• Provisioning ships and aircraft carrying international navigation, excluding private recreational navigation.

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When to Pay Excise Duty?

Excise duty must be paid at the time of removal of goods. Assessees must pay the excise duty on the manufacture or production of goods. Under Rule no. 8 of the Central Excise (Amendment) Rules, 2002, excise duty should be paid on the fifth day of the following month from the date the goods were removed from the warehouse or factory for sale. If it is paid online through net banking, the due date to make the payment is the sixth day of the following month. However, if the payment is made in March, it must be done before March 31.

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How to Pay Excise Duty?

The Central Board of Excise and Customs launched the Electronic Accounting System in Excise and Service Tax (EASIEST) in 2007. It is a web-based payment gateway to help pay service tax and Central excise duties online. From 1 October 2014, it has been compulsory for all Service Tax and Central Excise assessees to pay service tax and excise duties online via net banking.

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Step-by-Step Process to Pay Excise Duty Online

To pay your Central Excise Duty online, visit the NSDL-EASIEST website at https://cbec-easiest.gov.in/EST/ and choose E-Payment (Excise & Service Tax). Here are the steps you will then have to follow to pay it –

1. Key in the 1-digit Assessee Code provided by the jurisdictional Commissionerate.

2. A simple online check will validate your Assessee Code.

3. If your code is valid, the screen will display the corresponding assessee details such as name, address, Commissionerate code, etc.

4. The Excise Duty to be paid will be chosen automatically based on your Assessee Code.

5. You must choose the kind of duty or tax to pay. To do so, click on ‘Select Accounting Codes for Excise.’

6. You can choose up to 6 Accounting Codes at any time. Once you choose your code/s, the central system will validate the date, after which you will see a drop-down menu showing the names of different banks that provide the online payment facility. Choose the bank you prefer to make the payment to.

How to make the payment?

1. After choosing the bank, move to the payment process. You will be redirected to the net banking site of your chosen bank.

2. The challan details you have entered will be transmitted to the bank with your location code. Log in to your net banking account to pay.

After you have successfully paid the Excise Duty, you will see a challan counterfoil that contains the payment details, the Challan Identification Number, and the name of the bank through which you have made the payment. This counterfoil can be used as a receipt or proof of payment. You can download the same from the bank website.

Once you have made the payment online, you can view the ‘Challan Status Enquiry’ at https://onlineservices.cbec-easiest.gov.in/csi.indexl and confirm that you have found/uploaded the e-payment challan to the NSDL website. If you cannot find the challan on the NSDL website, you can complain to easiest@nsdl.co.in.

Penalty for not Paying Excise Duty

• If you fail to pay excise duty or commit an offense related to any excisable product, the duty chargeable exceeds Rs.50 lakh. The defaulter may face imprisonment for a term of up to 7 years. A Fine will also be charged to the defaulter. Sometimes, the imprisonment term could extend up to 3 years, with or without a fine, depending on the case.
• Under Section 11A(4), the reasons for punishment for not paying or underpaying excise duty could be fraud, wilful misstatement, conspiracy, or suppression of facts. Here are the penalties for the various offenses related to Excise Duty:
• The assessee will be subject to a penalty of 50% of the duty in case excise duty was –
  • Not levied
  • Not paid
  • Short-levied
  • Short-paid
  • Incorrectly refunded due to conspiracy, fraud, suppression of facts, or wilful misstatement.
• If the excise duty and the payable interest are paid within 30 days of communication, the penalty will be 25% of the duty.
• If someone engaged in transportation, deposit, concealing, removal, sale, purchase, or keeping of any excisable products that they know are liable to confiscation as per the law, are liable to a penalty equal to the duty as applicable, or Rs. 20,000, whichever is more.
• If a person generates an excise duty invoice claiming the removal of goods when said goods have not been delivered must pay the penalty equal to the amount of such benefit or Rs.5,000, whichever is more.

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